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mapleleaf

Since June 23rd each item of economic news has been seen in the context of whether it vindicates those who voted Leave or voted Remain in the EU referendum. However the miserable failure of the negotiations between the EU and Canada for a free trade deal provides no comfort for anyone. Chrystia Freeland, Canadian Trade Minister, was literally in tears. For the rest of us it is difficult to know whether to laugh or cry. All 28 member states back the deal – yet it has (apparently) been scuppered because of opposition from the Wallonia region of Belgium. 

Of course there is a lot of sovereignty surrendered by EU membership. However member states still retain enough power to make the organisation pretty dysfunctional. The exasperating negotiations with Canada have been going on for seven years. We have had various EU countries disregarding the whole idea of free trade and demanding fiddly special protections.

This is unfortunate. Even once we have left the EU it is in our interests for those countries retaining membership to prosper. We often talk in terms of countries “competing” but economic failure elsewhere does not make us richer.

What are the implications for our own future trading relations?

Brexiteers surely have a point in saying that negotiations between two sovereign nations will be less problematic and the prospects for a much more rapid British/Canadian trade deal are positive.

On the other hand Remainers might note the discouraging signs for a UK/EU trade deal. Of course it should be easier for us than Canada – as we have the starting point of the existing arrangements. Tariff free access to the single market and the EU tariff free access to the UK would merely continue – it would not be something new.  There is also the consideration – so frequently made during the referendum – about our imports of French wine and German cars. So let us suppose the French and German Governments cease the bluster and accept the reality that a free trade deal would be in their interests. Even that might not be enough. What if Wallonia scuppers it? Or Romania? Or Bulgaria? Or….

Rishi Sunak, the Conservative MP for Richmond, has argued that Switzerland’s success offers encouragement for us. The EU’s deal with South Korea took five years longer to conclude than the one between Switzerland and South Korea. While the EU managed to close deals with Singapore and the Faroe Islands, Switzerland managed one with China.

Sunak adds:

“The scales of the global economy are tipping eastward and, as they do so, the EU’s trade failings are taking an increasingly heavy toll on the UK. The reason for that is this is that Europe’s major economies are primarily focused on the European market. Britain, meanwhile – the only major EU economy that exports more outside the EU than within it – is traditionally far more outward looking, with EU exports accounting for just 13 per cent of our GDP and falling.”

Another Conservative MP, Dominic Raab, presents the Brexit negotiations as follows:

“Diplomacy will focus on where, between the range of tariff-free trade (that we already enjoy) and average EU external tariffs of 3.6 per cent, we end up. There is strong mutual interest in avoiding new tariffs. Yet any new trade barriers would hit Continental businesses far harder, because they sell £68 billion more to us each year than we do to them.”

Let us hope reason prevails. If it does not and tariffs constrain trade with the continent then at least the UK will have the benefit of expanding trade with the rest of the world. Tony Blair once suggested Brexiteers  were like the sheriff in Blazing Saddles who put a gun to his head and declared:

“If you don’t do what I want I’ll blow my brains out.”

On the contrary. As the UK prepares to expand our trade with the world in reality the greatest act of self harm would be by the EU if it refuses to agree a deal. They talk of punishing us as a warning to others not to leave. In fact they would be giving an incentive for more nations to head for the exit – and then be able to agree unrestricted access to our markets.

137 comments for: The EU is dysfunctional at negotiating trade deals – which is bad news for everyone

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